First item on billionaire Oracle founder Larry Ellison’s Hawaiian to-do list: Buy an island. Second item: Buy an airline to fly him there.
At least that appears to be Ellison’s agenda given his acquisition this week of Hawaiian Island Air, a small carrier that shuttles passengers between the islands of the Aloha State. The deal comes less than a year after Ellison bought the island of Lanai, a former pineapple plantation adjacent to Maui that is now primarily known for its high-end resorts and golf courses, from fellow billionaire David Murdock.
The financial terms of neither deal has been disclosed, though local media pegged Ellison’s June 2012 purchase of Lanai at between $500 million and $600 million.
DLA Piper corporate partner Brad Rock worked as outside counsel for Ellison— whom Forbes named the world’s sixth-richest man with a $36 billion fortune—on both matters. Rock, who is based in San Francisco, said Wednesday that his client and Island Air signed a letter of intent just after Christmas and finalized the deal Tuesday. Structured as a straightforward stock purchase, the existing airline entity will become a wholly owned subsidiary of Ohana Airline Holdings, which is in turn entirely owned by Ellison.
Unlike his work on the Lanai buy, the airline acquisition did not earn Rock a trip to Hawaii. "Buying a company doesn’t have the social complexity that buying an island has," he says. Last July, Rock told The Am Law Daily that getting to know Lanai’s people, culture, and politics was as important as the more traditional aspects of the due diligence process involved in that transaction. His visits to the island last year took him to some of its less-glamorous corners, including the local landfill, a solar power farm, a woodworking shop, and a feral cat kennel.
The timing of the airline sale coincides with an announcement from Island Air that it has received permission from the Federal Aviation Administration to begin operating a 64-seat ATR 72 turboprop plane. The airline, which launched in 1980, until now has only operated smaller planes.
Allan Mendelsohn, who has worked as regulatory counsel for Island Air for about seven years, said Wednesday that he helped the airline get permission from the U.S. Department of Transportation to fly larger aircraft about three years ago, but that once the recession hit, the plans never took off. "A lot of people didn’t go to Hawaii anymore," says Mendelsohn, of counsel at Cozen O’Connor in Washington, D.C.
Island Air—whose 5 percent of the market makes it the second-biggest player in inter-Hawaiian island travel behind rival Hawaiian Air, which controls 84 percent of the market—has encountered turbulence in the past.
Stewart Pressman, a corporate partner at Honolulu firm McCorriston Miller Mukai MacKinnon who advised Island Air on the sale to Ellison, says the airline has tried to sell itself before, though he declined to discuss specifics. Earlier this month, Island Air announced that it had hired a Skadden, Arps, Slate, Meagher & Flom team led by Los Angeles partner Van Durrer II as restructuring counsel. At the time, the Honolulu Star-Ledger reported that Ellison was rumored to be buying the airline.
Les Murashige, who took over as the airline’s CEO last October, said in a statement that the deal caps a yearlong restructuring at the 245-employee company (The announcement noted that the ownership change isn’t expected to affect the current staff). "[Ellison] has the vision and resources to literally take Island Air to new heights," Murashige said.
In acquiring the airline, Rock says, Ellison will be able to begin improving access to his other Hawaiian acquisition. That, in turn, could help improve the island’s up-and-down tourism industry. Since buying 98 percent of the 141-square mile island—the rest belongs to home owners and the government— Ellison has taken steps to improve goodwill among Lanai’s 3,135 permanent residents. His first move? Reopening the island’s community pool, which had been shuttered by Murdock.
Other lawyers working for Ellison on the Island Air deal include Wiley Rein partner Alan Hernandez and of counsel Edwin Bailey in Washington, D.C., on regulatory issues; and Marr Jones & Wang partner Richard Rand in Honolulu on labor aspects. The DLA Piper team also included Palo Alto corporate partner Craig Tighe, Palo Alto tax partner David Plewa, and San Francisco ERISA partner Mark Boxer.
Rounding out the L.A.–based Skadden restructuring team advising Island Air are restructuring partner Glenn Walter, labor and employment partner Karen Corman, tax partner Kenneth Betts, and associates Ramon Naguiat, Kimberly Jaimez, and Annie Li.